Microeconomic evidence of creative destruction in industrial and developing countries

Eric Bartelsman, John Haltiwanger and Stefano Scarpetta1
Authors registered in the RePEc Author Service: Stefano Scarpetta

No 3464, Policy Research Working Paper Series from The World Bank

Abstract: In this paper the authors provide an analysis of the process of creative destruction across 24 countries and 2-digit industries over the past decade. They rely on a newly assembled dataset that draws from different micro data sources (business registers, census, or representative enterprise surveys). The novelty of their approach is in the harmonization of firm-level data across countries, which enables international comparisons and the identification of country-specific factors as opposed to sector and time effects. All countries display a massive reallocation of resources, with the entry and exit of many firms in all markets, the failure of many newcomers and the expansion of successful ones. This process of creative destruction affects productivity directly by reallocating resources toward more productive uses, but also indirectly through the effects of increased market contestability. There are also large differences across groups of countries. While entry and exit rates are fairly similar across industrial countries, post-entry performance differs markedly between Europe and the United States, a potential indication of the importance of barriers to firm growth as opposed to barriers to entry. Transition economies show an even more impressive process of creative destruction and, those that have progressed the most toward a market economy show better outcomes from this process. Finally, Mexico shows large firm dynamics with many new firms entering the battle but also many failing rapidly, while Argentina resembles Continental Europe with smaller flows and less impressive post-entry growth of successful firms.

Keywords: Microfinance; Environmental Economics&Policies; Small Scale Enterprise; Banks&Banking Reform; Small and Medium Size Enterprises; Environmental Economics&Policies; Microfinance; Small Scale Enterprise; Private Participation in Infrastructure; ICT Policy and Strategies (search for similar items in EconPapers)
Date: 2004-12-01
New Economics Papers: this item is included in nep-dev
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Citations: View citations in EconPapers (326)

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Related works:
Working Paper: Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries (2004)
Working Paper: Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries (2004)
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